Newsom’s May Budget Revise: What it Means for Cities and Counties

Governor Gavin Newsom unveiled a $306.5 billion revised budget proposal Friday amid a shortfall that has grown from a projected $22.5 billion to $31.5 billion in just four months.

Much has changed from a year ago when Newsom touted a surplus of nearly $100 billion. The Governor struck an austere tone Friday, explaining the need to “maintain our prudence.” The state is facing significant economic uncertainty, buoyed by an extension of the tax filing deadline in most counties. That uncertainty could complicate the next month of negotiations between Newsom and lawmakers. 

Newsom's May revision includes $224.1 billion in general spending, $79.5 billion in special funds, $2.9 billion in bond funds, and an estimated $37.3 billion in reserves. It proposes a $450 million withdrawal from the safety net to offset Medi-Cal and CalWorks costs.

Local Impacts

Overall, the budget avoids deep cuts to programs that benefit cities and counties. However, the Governor is proposing $712.5 million in reductions or deferments for housing funds — a move that would “only exacerbate the housing crisis,” according to Cal Cities.

The revision maintains the $3.4 billion in proposed funding for homelessness, including $1 billion for local Homeless Housing, Assistance and Prevention grants.

To aid implementation of the Community Assistance, Recovery, and Empowerment (CARE) Act, the plan includes the following:

• $128.9 million from the General Fund in 2023-24

• $234 million from the General Fund in 2024-25

• $290.6 million in 2025-26

• $290.8 million in 2026-27 and annually after

• $15 million in one-time funding for Los Angeles County, which is implementing the program early 

Newsom is also proposing an additional $172 million for Naloxone distribution in response to the fentanyl crisis. It’s part of an $800 million public safety plan.

After a series of devastating winter storms, the Governor wants to shift funds from drought response to flood protection. Flood protection efforts would get an extra $290 million in funding under this plan, bringing the total to $492 million. A one-time investment of $75 million would go to local flood control projects. $40 million would go toward San Joaquin Floodplain Restoration. 

The plan leaves nearly all of the original forest resilience and wildfire mitigation funding ($2.7 billion) in place.

On the healthcare front, the proposal would tap $150 million of General Fund dollars to support hospitals experiencing significant financial distress. This is important for rural counties like Madera, which recently saw the closure of its only hospital and emergency room.

The revised budget also allocates $159.5 million in county administration costs for CalFresh and $150 million for the Rapid Response Program to aid humanitarian efforts at the U.S.-Mexico border. 

One of the biggest winners of the May revise may be the City of Fresno, which would receive $250 million to make improvements to the downtown area.

“I think it is the single most beneficial award that will have ever come to the city," said Mayor Jerry Dyer, as quoted by the Fresno Bee. 

Added Fresno City Council President Tyler Maxwell: "As someone born and raised in Fresno, and hearing elected official after elected official say they are looking for a way to revitalize downtown Fresno, Gavin Newsom gave us 250 million ways to do it.”

To learn more about the May Revision’s impact on local governments, read the analyses from Cal Cities and the California State Association of Counties.  

This article has been updated.